BM627 Managing Innovation in Business: Amazon Innovation Audit

This report provides an in-depth analysis of innovation management within Amazon, a leading e-commerce and cloud computing platform. It begins with an overview of the e-commerce industry and Amazon's background, highlighting key factors driving its innovation. The analysis incorporates PESTEL and Porter's Five Forces models to assess the external environment's impact on Amazon's innovation. A SWOT analysis evaluates Amazon's existing innovation performance and capabilities, considering its resources, including physical, financial, human, and intellectual capital. The report further explores Amazon's strategic capabilities, value network, and value chain, identifying areas for future innovation in processes, products, positioning, and production beyond 2019. The analysis also touches upon Amazon's innovation timeline including low cost subscription, delivery speed, fastest delivery and voice automated operation.

Running head: MANAGING INNOVATION IN BUSINESS
MANAGING INNOVATION IN BUSINESS
Name of the Student
Name of the Organization
Author Note

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Executive Summary
A brief overview of Amazon as well as the field e-commerce in which the company
belongs helps in getting information about the company in brief. The report helps in managing
innovation in the largest online retail sector company Amazon. It is the largest online company
as per revenue is concerned. There is a huge impact of both the PESTEL as well as the
MICHAEL PORTER’S FIVE FORCES model on the innovation of Amazon which has been
described within the study. Through PESTEL analysis, the company is able to identify all the
opportunities and threats based on the factors which are external in the remote environment of
the company. The different intensities of several external factors affecting the company based on
the Porter’s Five Analysis model is clearly described. SWOT analysis comprising of all the
strengths, weaknesses, opportunities and threats have been used for assessing the existing
capabilities of innovation of the company. The SWOT analysis basically summarizes the main or
the key issues related to the environment of the business of the company and the strategic
capability of the company which are considered to be most likely in impacting the development
of strategy. Several resources which are used by Amazon include physical resources, financial
resources, human resources and intellectual capital. The report comprises of all the mentioned
resources in details. All kinds of strategic capabilities are well described and checks whether a
particular strategic capability is valuable one, rare one or rather an inimitable one. The value
network or the analysis of value chain clearly describes the set of several links as well as the
relationship within the respective organization which are required for creating a product. The
report has presented the value network of Amazon in a prominent way depicting all the strategic
capabilities within the network. Lastly the paper is summarized by identifying or rather

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recommending areas within the processes, products, position as well as production required for
the innovation in the future from 2019 and beyond in details.

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Table of Contents
Introduction......................................................................................................................................4
Overview of the industry.................................................................................................................4
Overview of the organization..........................................................................................................4
Factors which have driven innovation in Amazon..........................................................................5
Impact of MICHAEL PORTER’S FIVE FORCES on Amazon.....................................................6
Impact of PESTEL analysis on Amazon.........................................................................................6
Existing Innovation Performance and Capabilities.........................................................................8
Resources.......................................................................................................................................11
Evidence of innovation in Amazon(Position, paradigm, product or process)...............................12
Value of strategic capabilities:.......................................................................................................13
Value Chain Analysis....................................................................................................................14
Conclusion.....................................................................................................................................15
References......................................................................................................................................16

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Introduction
The main purpose of the report is to manage innovation in the largest online retail sector
company Amazon. The first part of the report comprises of the overview of the organization as
well as the industry. It is followed by a SWOT analysis which is shown by portraying existing
innovation performance and capabilities of the Amazon. It also comprises of all kinds of
resources used by the company whether physical, financial, and human as well as the intellectual
capital. All kinds of strategic capabilities and the value network is clearly depicted.
Overview of the industry
The field or the industry of e-commerce comprises of the activities of selling and buying
a number of products online. E-commerce industry comprises of several technologies like
commerce of mobile, transfer of electronic funds, management of supply chain, online
marketing, online processing of transaction, interchange of electronic data and systems of
inventory management. (Ritala, Golnam and Wegmann 2014). The country UK is considered to
be the third largest market of e-commerce in the world. E-commerce is counted for about
nineteen percent of the total business share turnover in the country recently by the year 2015. E-
commerce industry is responsible for employing shopping online directly from the retail sales to
the customers through mobile apps or websites, buying and selling between several businesses
and participation in several marketplaces which are present on the internet which are mainly
responsible for processing sales from customers to customers. Currently the statistics of e-
commerce has stated that about 40% of the users of internet throughout the world are buying
goods or products via mobile, tablet, desktop or some other devices upon the internet. This has

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resulted in an amount of about 1 billion buyers online and has been projected to grow
continuously.
Overview of the organization
Amazon is considered to be as a multinational and one of the largest marketplace in the
field of e-commerce and platform of cloud computing as per the measure of the capitalization of
market and revenue (Kantor and Streitfeld 2015). Amazon was founded by Jeff Bezos and has its
headquarters situated at Seattle, Washington in US. The name Amazon was founded soon after
the Amazon River, as it is the largest river in the world. The alphabet “A” could help the
company in showing at the top of the list of alphabets and finally the site came online as
Amazon.com in the year 1995. Some of the products of Amazon includes Amazon Appstore,
Amazon Kindle, Amazon Prime and Amazon Video. The company Amazon is considered to be
as the largest online company as per revenue is concerned. The company was named Amazon
considering the name of the largest river in the World.
Amazon Innovation Timeline
Followed by the years from 2002 to 2019 significant innovation has been noticed in Amazon
services.
 Low cost subscription for Expensive product and services – In order to provide the access
to the expansive product and services in low cost, Amazon has invented a paid
subscription service Named as Amazon Prime in the year 2005. It has offered the
Amazon customers the access of paid and expensive services in less cost which includes

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free delivery of any product, free video as well as movie streaming and many more. From
the initial stage of this service till now it has included more than 100 million users across
the world.
 Delivery Speed – In order to offer the fastest delivery service to the prime users Amazon
has introduced a service called Amazon Prime Now in the year 2014. This service has
offered a quick delivery of ordered products within more or less one hour from the
nearest shop holder or restaurants. After 2 years of this innovation the studies has proven
that in the year 2016 it has involved almost one third users from Amazon prime.
 Fastest Delivery – In the year 2015 Amazon has introduced the fastest delivery service
by Air transport. The main objective of this service is to shorten the expected delivery
time in less than it would take time to find the car key or something else. It is known as
Amazon Prime Air formerly and this particular innovation has been operating service for
delivery by utilizing its personal aircraft which is branded. It has been operated by Air
Transport International, Atlas Air as well as Southern Air.
 Voice automated operation – In order to adopt new technology to the Amazon services
they have invented the voice automated application named as ALEXA. This application
is run by the voice of the customer. This innovation has promoted the Amazon services
into high extend.
Impact of MICHAEL PORTER’S FIVE FORCES on Amazon
The company is seen to have been competing against several firms and the scope of the
business of e-commerce globally exposes Amazon to a diverse and wide set of external forces.
There is a need for the company to make sure that it can remain strong and flexible despite any
changes in the conditions of the environment of the online retail company (Dälken 2014).

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Amazon is seen to have been enjoying the topmost position in the retail market online. The
different intensities of several external factors which affect the company based on the Porter’s
Five Analysis model is described below:
I. Competitive rivalry (Strong) - Amazon has Multiple Equal Competition with other
service providers who offers the same sort of services to the customers as Amazon, it has
been observed that the Competitive rivalry is strong for amazon. The company
experiences a very strong force of several substitutes due to high availability.
II. Power of the customers in bargaining (Strong) – This particular external factor affects
the company a lot in terms of the customer’s ability in finding alternatives to the online
retail service of the company.
III. Power of the suppliers in bargaining (Moderate) – The small population has been
empowering all the suppliers for imposing a very strong force upon the e-business of the
company. The forward integration which is moderate limits the actual effect of the
suppliers upon the company.
IV. Threats of being substituted (Strong) - The threat of being substituted by any other
company is very high as, there is a high chance of being substituted by the any company
who provides better quality product and more efficient services than Amazon.
V. Threats of a new entry (Weak) - There are less chance of being effected by the any new
entry to the market as Amazon has already a significant impact on the market, thus there
is a less chance of any new company to take the market position of amazon.
External factors which are identified in the analysis of Five Forces clearly indicates all
possible reductions of the share of the market and in the performance of the business due to the
strong competition which involves large technology and retail firms (Grigore 2014).

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Impact of PESTEL analysis on Amazon
 The company Amazon has received a number of benefits from the potential stability. Such a
condition has created a huge opportunity for the company in expanding or rather diversifying
the business of the company in all the developed countries.
 The economic stability of several developed countries has incremented the likelihood of the
success of the company in the markets. Such a situation will be lowering all the issues related
to economy in remote environment and thereby it will be able to finally minimize all the risks
to the online retail business expansion of the company.
 As per the social factors are considered, the increment in the disparity of wealth mainly refers
to the increase in the gap in between both the rich and the poor within several countries. Such
a condition is going to threaten the company in terms of the potential stagnation of the
income level which are disposable.
 The company faces a threat of the rapid obsolescence related to technology and this imposes
a huge pressure upon the company for continuously developing the technological assets of
the company. However, such a condition can be an opportunity as well for optimizing the
business.
 The company has a number of opportunities in improving the environmental impact as a
response to the interest in the programs of environment which are rising.
 As per the legal factors are concerned, the rising regulation of products is seen to be a result
of all the demands of the society on the organizations of business. This particular external
factor has created huge opportunities for the company for intensifying the efforts needed for
the reduction of counterfeit sale upon the retail website on the internet.

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Existing Innovation Performance and Capabilities
SWOT analysis
Amazon is considered to be as the leading online retail company in the World and can
leverage on different opportunities in the markets which are emerging. It is required to make sure
that its supply chain of warehouses networked globally is responsible for delivering value which
is substantial for itself as well for all its stakeholders (Pandit and Poojari 2014). There is a need
for the company to rethink about its business model of operation and show improvement due to
the fact that Amazon has not been able to deliver a decent profit in the past five years (Ghaffari,
Delgosha and Abdolvand 2014).
Strengths
 Leadership in cost, strong focus and differentiation forms the three main strategic forces
which have helped the company in gaining a lot of profits from the course of action and
even helped the shareholders of the company in deriving value from the organization.
 Its use of up growing and advantageous technology of information and the utilization of
e-commerce as an easy to use platform which helps the company to keep its position
ahead of all its competitors (Dicker 2013).
 It is seen to be have been enjoying the top position in minding recalls from customers
globally and has a special recognition in the market.
 Use of logistics which are superior and other systems responsible for distribution have
actualized fulfillment of the customers in a better way and this results the company in
acquiring competitive advantage over all its competitors (Adolph and Greenwood 2015).

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Weaknesses
 Free shipping provided by the company can be dangerous and can lose its margins and
thus it can not be able to properly optimize on the expense due to this strategy of offering
free shipping.
 Negative publicity has been attracted by the company on account of the issue of
avoidance of tax in UK. Maximum of the revenue is generated from the markets which
are well established (Collins 2016). The company is seen to have been struggling in
making it profitable and thus affecting the profitability of the overall group.
 The launch of the fire phone and kindle fire by the company are considered to be as big
flops. Several such flop products resulted in a drop or reduction in the deep pockets of the
company (Rossman 2016).
Opportunities

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 There is a chance of the company to come up with the in-house brands of itself in
several categories of products and can even differentiate their offerings. This may help
in making profits in the highly competitive market of e-commerce (Sultan 2014).
 Opportunity in terms of expansion of the global footprint and opening of more and more
sites in the markets which are emerging may help the company in keeping its
competition in the market.
 The company can increase the portfolio of all the offerings provided by the company
itself but keeping more stocks of products than the standard which recently places it in a
level of both strength as well as comfort because this may translate into much higher
revenues (Cohen 2013).
 The company can roll out more products under the brand of its own instead of
remaining a forwarding site for products belonging to the third party. In a different way
it can be said that the company can increase the products in number under its own brand
itself instead of simply selling and keeping the products in stock made by the partners of
the company.
Threats
 It is seen that the industrial low barriers of entry affect the present business of the player
because increase in the number of companies mean increase in tough competition, wars
of price, shrinkage of margins and losses which result into the rise of question about the
sustainability of the players (Gharehchopogh, Rezaei and Maleki 2013).
 The company does not have clarity on several issues which are related to the FDI in multi
retail of brand and it has been a huge hurdle in the achievement of success of the players
of e-commerce.

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 Increasing concern over shopping performed online is considered to be one of the biggest
threats as due to the theft of identity and hacking which keeps the data provided by the
consumer exposed. There is a need for the company to move quickly for allaying all the
concerns of the customers over the site and make sure if the privacy and security on the
internet is guaranteed.
 The company has to face competition from all the local retailers online who are much
more agile when type of strategy is concerned (Rothaermel 2013).
This SWOT analysis is defined as a guide or a rather a road map which the company can
implement while proceeding forward (David and David 2013). The main thing which came
out from this particular SWOT analysis is that the company needs to focus on the
profitability and not always on the volumes only if the company wants to keep its
competition in the future.
Resources
Physical resources: The physical resources of Amazon generally involves all their products,
patents, warehouses, databases of customers and several infrastructures of technology like
system of computing or storage on the net (Shawish and Salama 2014).
Financial resources: There is not huge differences between the cash equivalents or between
inventories and investments. Inventory is considered to be as the largest in number about
4,255,000 dollar. There is a difference of about 1,700,000 dollar between the liabilities and the
assets of the company. Current assets comprises of about 12,154,000 dollar in total and current
liabilities comprises of about 10,488,000 dollar in total. The company has taken about a time

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period of 14years for making as much in the net profit as it has done last quarter. Amazon has
been able to whop about $1.86 billion in the fourth quarter of the year 2017.
Human resources: Human resources of the company comprises of several positions like
Assistant of Human Resource(HR), Business partner of HR, Manager of HR, Recruiter,
Coordinator of recruitment, manager of recruitment and specialist of immigration (Ritala
Golnam and Wegmann 2014). Amazon is considered to be as the second largest private
employer which comprises of about 6,47,500 number of total employees.
Intellectual capital: Intellectual capital is considered to be the sum of capital of human, capital
of structure and relational capital which forms the main forces of distinct advantages of
competition and differences the performance of one company from the other one. Human capital
involves knowledge or skill of all the individuals, structural capital involves all the connective
links and lastly customer capital involves the relationship with the customers.
Evidence of innovation in Amazon (Position, paradigm, product and
process)
In order to develop and bring effectiveness to the business the 4p model was introduced.
These 4p’s stands for Position, Paradigm, Product and Process.
Position: The innovation factor position is nothing but similar to market promotion. At present
in the global market it is very important to maintain the well market position while analyzing the
market position there is a drastic change in the evolution of Amazon service. After incorporating
Amazon in 1994, Jeff Bezos has introduced the company into the public platform in May, 1997.
Initially it was an online book seller in Germany and UK.

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Paradigm: While exploring the innovations in Amazon services it has been noticed that amazon
has brought a Paradigm shift in the e-commerce market by their evolutionary growth in the
platform of e-commerce. As per the knowledge Amazon is one of the largest rivers in the world,
similarly Amazon.com has a business objective to be the largest e-commerce store across the
world. From the initial stage of its business in the year 1994 it has shown an evolutionary growth
by adopting new technology in the business platform which has helped them to improve their
services as well as it has included wide range of products into their services.
Product: Along with the above position and paradigm Amazon has a significant evolution in
products as well. From the initial stage Amazon was an online book seller company, followed by
the years Amazon has implemented and included various other features into the business service.
Amazon has a wide range of product and services which has set a benchmark to other services
providers, those products are listed below:
 Amazon Prime.
 Amazon Fresh.
 Alexa.
 Amazon Web Services.
 Amazon drive.
 Appstore.
 Kindle.
 Amazon Wireless.
 Amazon Digital and game store.
 Music Unlimited.
 Amazon studio.

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 Music.
 Kindle Store.
 Fire TV.
 Video.
 Fire Tablet.
 Echo.
Followed by the years Amazon has invented these above product and services which has helped
Amazon to enhance their market value.
Process: While analyzing the service process it has been observed that Amazon has a systematic
way to complete their orders. The company had been seen to have opened about two dozen of
new centers of fulfillment and finally provided its first delivery in United Kingdom by a drone
which was autonomous. The strategy of the company being evolution which was continuous led
the respective company to perform several experiments in all the neighborhood areas and finally
build all of them into a number of franchises.

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Value of strategic capabilities:
Strategic Capabilities Value Rare Inimitable
Categories of product
which are diversified
Yes Yes Yes
Infrastructure of
technology(AWS
EC2 and S3)
Yes Yes Yes
Logistics Yes Yes Yes
Senior management
team ability of
negotiation
Yes Yes No
Flexibility of the
expansion of business
Yes Yes Yes
Promotions and
channels of online
marketing
Yes No No

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Value Chain Analysis
Infrastructure of firm
Margin
Resources of human
Development of technology
Procurement
Inbound
Logistics
Operations Outbound
Logistics
Sales and
marketing
Service
Followed by the above value chain diagram it can be stated that the organization Amazon
has effectively structured several field in order to deliver best quality services to the customers.
In the above mentioned diagram it has clearly shown that the cooperation of human resource
management team as well as the incorporation of the advance technology has made a significant
impact on the logistics, marketing as well as in the services of the respective service provider.
The industry in 2019 and beyond

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It is seen that Amazon comprises of all the strengths necessary for continuing the
dominance of e-commerce. Despite this the company faces a number of concerns. Amazon is
seen to have limited presence in the markets which are developing. It is to be recommended that
there is a need for the company to increase the strategic entry into the countries like UK which
are rapidly developing which delivers major opportunities of growth depending upon the rapid
development in the case of economy. There is also a need for maintaining its competition within
the market by incrementing the number of mortar and brick stores which further help in
increasing the reach within the market and also the popularity of brand. Another
recommendation which can be made is that the company must address cybercrime by
undertaking several measures of information technology which are intensified for providing
security and protection within the organization. Such issues affect the confidence of the
consumer and the stability of the macro environment of the firm. The company is also seen to
have been facing a lot of competition with companies like Walmart. Through PESTEL analysis
which is done above the company gets to know about the key issues which are very much
important in keeping up with the success of the company for a long time. It is needed to expand
the operations of Amazon in the markets which are developing which is capable of presenting
and delivering faster economic enhancement and high potential growth of e-commerce. Some of
Amazon trends which are predicted to shape the year 2019 and beyond involves expansion of the
stores of amazon, focus on the vendors of Amazon, expansion of Amazon in the presence of
brick and mortar and merge of the company with the social media. It also focusses on leveraging
data of consumer which is powerful, accelerating and increasing the changes of the capabilities
of advertising, entering in the CBD market and dominating the market despite the up growing
competition.

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Conclusion
Followed by the above report which has described the innovation factors of Amazon it
can be concluded that Amazon is seen to be a multinational marketplace in the field of e-
commerce and platform for the computation of cloud as per the capitalization of market and
revenue is considered. In order to provide evidence to support the above statements an SWOT
analysis has been performed which has effectively discussed the strengths, weaknesses.
Opportunities as well as the threat factors present in the business structure of Amazon. Followed
by this from the analysis of the five porter’s model several aspects has been observed which has
helped to understand the environmental effect on the amazon innovation. Despite this fact,
Amazon is seen to have been competing against several firms and is facing a diverse and wide
set of external forces. There is a need for the company to make sure that it can remain strong and
flexible despite any changes in the conditions of the environment of the online retail company.

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